For ones to reach the heights in the business world we need franchising – a licensing arrangement in which a business owner, known as the “franchisor,” markets a trademarked product or service through affiliated dealers known as “franchisees.” While these franchisees own their establishments, terms of franchising agreements typically require them to share operational responsibilities with the franchisor.
Equivalent to success rates, the franchises also tend to have a higher rate of risks and can fail for any number of reasons like any other business. So therefore proper investigation is to be done before buying any franchise.
Types of Franchises:
Business Format Franchises: With this a company expands by supplying independent business owners with an established business, including its name and trademark.
Product Franchises: Here manufactures control how retail stores distribute their products. Through this kind of agreement, manufacturers allow retailers to market their products and to use their names and trademarks.
Manufacturing Franchises: Through this a franchisor grants a manufacturer the right to produce and sell goods using its name and trademark. This type of franchise is common among food and beverage companies.
Business Opportunity Ventures: Business opportunity ventures involve an independent business owner buying and distributing the products from one company.
Mid-sized franchises like restaurants, gasoline stations and trucking stations involve substantial investment and require all the attention of a business person.
Right franchise is totally based upon:
What are your interests?
Do you want to develop multiple units?
How easy it to resell your franchise and what are the restrictions or costs from the franchisor?
What days or hours you want to work?
Advantages of franchising:
Branding: The first thing Franchises offer franchisees is a strategic identity that is not only effective, it has cumulative market impact. A successful brand is one that is remembered, and Franchises have some of the most successful brand identities in the world.
Advertising: Advertising can be one of the biggest expenses for any new business and for good reason. You cant survive without effective advertising and effective advertising is expensive.
Name Recognition: People today want guarantees like never before and name/menu/brand recognition gives them that assurance.
Reputation: The reputation of the franchise is important enough, it is what breeds positive expectations that keep patrons loyal, but this benefit coupled with a built-in umbrella of legal protection is an incredible bonus and one you cannot get as an independent.
Disadvantages of franchising:
You are exposed to fraud. If you fail to investigate the background of the franchisor or youre taken in by promises of quick profits with low franchise costs, chances are, you will just find yourself holding an empty bag.
When you buy a franchise, you are not free to do your own thing. You dont have much control on the products that are to be sold, the system that should be in place and, even, the location and general look of your business establishment.
Costs may be higher than if you are going to start your own business from scratch. Other than the initial cost of acquiring the franchise, you may also pay an agreed percentage of your sales and marketing or advertising fees.